Why Some Employers Are Becoming More Generous With Retirement Savings Plans

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WWR Article Summary (tl;dr)Americans in general are still far behind in saving what they need for retirement. About half don’t have 401(k) plans, and even those who do often don’t stash away enough.

Chicago Tribune

In an effort to recruit employees in competitive fields and help motivate older workers to leave the workplace when they hit retirement age, companies are becoming more generous with their retirement savings plans.

After pulling back on the extras during the recession, companies are devoting more to 401(k) matches, the free money they give employees who participate in company retirement savings plans.

Including the money they put toward profit sharing, 401(k)s and other benefits, the average company contributed 4.7 percent of each employee’s salary toward retirement savings in 2016, according to a study by the Vanguard Group, a mutual fund company. That was a notable increase over 2015, when companies contributed only 3.9 percent of each employee’s salary.

Despite the extra help, Americans in general are still far behind in saving what they need for retirement. About half don’t have 401(k) plans, and even those who do often don’t stash away enough. The Boston College Center for Retirement Research has estimated that almost half of Americans are not going to have enough savings in retirement to cover their needs.

To best position themselves for retirement, employees should save about 10 percent of their salary a year starting with their first job. If they wait until their 30s to start saving, putting away 12 to 15 percent a year is considered advisable.

It doesn’t all have to come out of pocket, however, and that’s where matching money from employers helps. For example, a person getting a 3 percent match could put away only 7 percent of their own salary and still fulfill the 10 percent savings goal.